REASONS FOR DECISION
Introduction
1 In these reasons, we revisit a difficult question of interpretation arising under the Retail Leases Act 1994 ('the RL Act'). It concerns the meaning of the word 'services' where it appears in s 12 of that Act.
2 These proceedings were instigated by a lessee, Skiwing Pty Ltd (hereafter 'Skiwing') against a lessor, Trust Company of Australia (trading as Stockland Property Management Ltd) (hereafter 'Stockland'). The lease between them ('the Lease') was of premises, known as Café Tiffanys, in a retail shopping centre in Sydney known as the Imperial Arcade.
3 The Lease was governed by the RL Act. It was dated 28 March 2000 and commenced on 1 May 2000. It followed an earlier lease commencing in 1993 and expiring on 30 April 2000.
4 Almost exactly one year ago, we heard an appeal ('the first appeal') against the decision of the Tribunal, constituted by Mr Donald, Judicial Member, in Skiwing Pty Ltd v Trust Company of Australia Limited [2004] NSWADT 169. This decision ('the Tribunal's first decision') was delivered on 17 August 2004.
5 In it, the Tribunal rejected two claims by Skiwing. One was for a declaration that Skiwing was not liable under clause 3.4 of the Lease to pay contributions to Stockland's 'outgoings', as defined in clause 1.16. The other was for a refund of contributions already made.
6 The Tribunal also upheld a cross claim by Stockland for a declaration that Stockland was entitled to enforce the obligation in the Lease to contribute to outgoings. It ordered Skiwing to pay to Stockland unpaid outgoings of $24,629.40 and unpaid promotional levy of $2,959.19 together with interest.
7 In its judgment, the Tribunal rejected a number of arguments raised by Skiwing. The argument that specifically concerns us here was to the effect that on account of s 12 of the RL Act Skiwing was not liable to make any contribution to outgoings under the Lease.
8 In order to appreciate the nature of this argument, it is necessary to examine a number of the Act's provisions regarding obligations of disclosure between lessors and lessees.
Relevant provisions of the RL Act
9 Section 9 of the RL Act provides, subject to criminal penalties, that a lessor or a lessor's agent must not offer to enter into a retail shop lease, invite an offer to enter into such a lease or advertise that a retail shop is for lease, unless he or she has in his possession a copy of the proposed lease and makes a copy available to any prospective lessee.
10 Under s 11(1), a lessor is required to give a 'lessor's disclosure statement' (this label is to be found in s 3) to a lessee at least seven days before the lease is entered into. This is defined in s 11(1) as a 'statement in writing' that conveys all the information indicated by a form contained in Part 1 of Schedule 2, so far as is relevant to the lease concerned. It need not, however, follow the 'layout' of the form in the Schedule.
11 The form contains the following list of matters as to which information is required. It appears under the heading 'Tenancy details':-
Finishes, fixtures, fittings, equipment and services to be provided by the lessor.
Lessee has to pay for the finishes, fixtures, fittings, equipment and services to be provided by the lessor: yes/no
If yes, to what extent:
Finishes, fixtures, fittings, equipment and services to be provided by the lessee.
Hours of access to shop outside trading hours.
Date on which shop will be available for occupation by the lessee.
Lessor's requirements as to quality and standard of fittings in shop.
12 A later section of the form, dealing with outgoings, requires that the lessee's estimated annual contribution to outgoings within each of the following listed categories be provided: Air Conditioning/ Ventilation; Audit Fees; Building Intelligence & Emergency Systems; Car Parking; Child Minding; Cleaning; Electricity; Energy Management Systems; Fire Protection; Gardening; Gas & Oil; Insurance; Land Tax; Lifts and escalators; Local Government rates and charges; Management Costs; Pest Control; Public Address/Music; Repairs and Maintenance; Sinking Fund for Repairs and Maintenance; Security; Sewage Disposal & Sullage; Signs; Telephones (Public); Uniforms; Water, sewerage and drainage rates and charges; Others (specify); Waste disposal and removal.
13 Later in the form, under the heading 'Retail shopping centre details', information is required as to 'Facilities and services provided by the lessor'.
14 'Outgoings' are defined as follows in s 3:-
outgoings means a lessor's outgoings on account of any of the following:
(a) the expenses directly attributable to the operation, maintenance or repair of the building in which the retail shop is located or (in the case of a retail shop in a retail shopping centre) of any building in the retail shopping centre or any areas used in association with any such building,
(b) rates, taxes, levies, premiums or charges payable by the lessor because the lessor is the owner or occupier of any such building or the land on which it is erected or is the supplier of a taxable supply (within the meaning of the A New Tax System (Goods and Services Tax) Act 1999 of the Commonwealth) in respect of any such building or land.
15 If s 11(1) is not fully complied with, a lessee may terminate the lease in writing within six months after it was entered into (s 11(2)). This remedy arises if either (i) no disclosure statement at all was provided or (ii) the disclosure statement given to the lessee 'was incomplete or contained information that at the time it was given was materially false or misleading'. But it is not available in the latter situation if two conditions are satisfied. These are (a) that the lessor acted honestly and reasonably and ought reasonably to be excused for the failure, and (b) that the lessee is in substantially as good a position as it would have been if the failure had not occurred (s 11(3)).
16 We note here that failure to comply with s 11(1) is also a criminal offence (s 11(6)).
17 Section 11 is not, however, the only provision of the RL Act conferring remedies on a lessee on account of a defect in a lessor's disclosure statement. Remedies may also arise under ss 10 or 12.
18 Section 10 confers a remedy of 'reasonable compensation' on any party to a lease who has suffered damage through entering into the lease as a result of a 'pre-lease misrepresentation' by another party to the lease. In s 10(2), it is stated that 'the giving of a lessor's disclosure statement to a prospective lessee' constitutes a 'representation', for the purposes of the section, as to the information contained in it. But the amount of compensation recoverable by a lessee under this section is likely to be limited, or indeed non-existent, unless it can be shown that if the true position had been disclosed by the lessor, the lessee would not have entered into the lease. This may be difficult to prove.
19 Section 12 is as follows:-
Lessee not required to pay undisclosed contributions
A provision of a retail shop lease that requires the lessee to pay or contribute towards the cost of any finishes, fixtures, fittings, equipment or services is void unless the liability to make the payment or contribution was disclosed in a disclosure statement given to the lessee in accordance with this Part.
20 Section 21 states that nothing in the Act prevents a retail shop lease from providing that special rent must be paid to cover the cost of fitout, fixtures, fittings and equipment installed or provided by the lessor at the lessor's expense. Unlike s 12, this section does not refer to 'services'.
21 Section 22 provides that a lessee is not liable to pay any amount to the lessor in respect of any outgoings except in accordance with provisions of the lease that specify, amongst other things, the outgoings that are to be regarded as recoverable.
22 Sections 27 and 28 have the effect of incorporating into agreements for lease various provisions requiring the lessor to give to the lessee written estimates of outgoings and statements (accompanied by auditors' reports) showing how the outgoings to which the lessee is required to contribute have been calculated.
23 Section 30 deals in subsections (1) and (2) with the calculation of contributions to outgoings by lessees in a retail shopping centre:-
Non-specific outgoings contribution limited by ratio of lettable area
(1) A lessee under a retail shop lease in a retail shopping centre is not liable to contribute towards a non-specific outgoing of the lessor (that is, an outgoing not specifically referable to any particular shop in the retail shopping centre) unless the shop is one of the shops to which the outgoing is referable, and is not liable to contribute an amount in excess of an amount calculated by multiplying the total amount of that outgoing by the ratio of the lettable area of the shop to the total of the lettable areas of all the retail shops to which the outgoing is referable.
(2) An outgoing is referable to a retail shop if the shop is one of the shops that enjoys or shares the benefit resulting from the outgoing.
24 Finally, we should mention s 11A, which deals with disclosure by lessees. It provides, subject to criminal penalties, that within seven days of receiving a lessor's disclosure statement (or such further period as may be agreed) a lessee must give to the lessor a disclosure statement containing the information set out in Part 2 of the form contained in Schedule 2. The form contains an acknowledgment by the lessee that he, she or it has received the lessor's disclosure statement and that a copy of the proposed lease was made available. It requires the lessee to specify what statements or representations by the lessor have been relied on.
25 In addition, paragraph 4 of this form states as follows:-
The lessee believes that the lessee will be able to fulfil the obligations contained in the lease, including the payment of the proposed rent, outgoings and other amounts, based on the lessee's own business projections for the business.
Relevant provisions of the Disclosure Statement and the Lease
26 The Tribunal's first decision contained at [4 - 6] and [9] the following findings regarding the Disclosure Statement that Stockland provided to Skiwing:-
4 In mid-1999 the parties began to re-negotiate for a continuation under a new lease and by letter of offer of 17 September 1999 written by Mr Ruben Aaron, the then Centre Manager,… Stockland offered to enter into a seven year lease. The letter of offer attached the Disclosure Statement and stated:-
"This letter of offer should be read in conjunction with the attached Lessor's Disclosure Statement".
Stockland's Disclosure Statement in turn stated:-
"This disclosure statement should be read in conjunction with the attached Lessor's letter of offer which contains commercial terms and other relevant information".
5 The letter of offer stated in clause 8:-
OUTGOINGS
Estimated at $44,881.45 per annum for the financial year ended June 2000 payable monthly in advance from lease commencement with any variation accounted for at the end of the financial year. A detailed breakdown of the Centre's outgoings is provided in the Disclosure Statement. The estimate of the Lessee's contribution is based on the proportion of the Lessee's tenancy bears to the gross lettable area of those tenancies in the shopping centre sharing the relevant costs/services.
6 There is no reference in the Disclosure Statement as such to outgoings. The versions of the Lessor's Disclosure Statement produced in evidence in this matter and other proceedings between the parties have not included any "detailed breakdown of the Centre's outgoings" referred to in clause 8 either within the document or as an attached document….
9 On all the evidence it is not possible to be satisfied on the balance of probabilities that an actual list of estimated outgoings was included in the offer package of 17 September 1999. It is equally clear however that Skiwing had received under its then current lease regular outgoings reports, estimates and actuals, and was well aware that that system would continue under the new lease….
27 Nowhere in the Disclosure Statement did Stockland indicate that Skiwing was to contribute to the cost of any 'services'.
28 In the Lease itself, two clauses are relevant. In clause 1.16, which formed part of a lengthy definitions clause, the opening words were:-
OUTGOINGS - the aggregate of all the following costs and expenses incurred by the Lessor in the conduct, management and maintenance of the Centre [i.e., the Imperial Arcade] as a high class shopping and commercial Centre but excluding rent or payments in the nature of rent payable under any head lease and excluding contributions by the Lessor to promotional expenses:-…
29 Clause 1.16 then listed 17 numbered categories of 'outgoings'. In summary, these were as follows: (01) municipal rates; (02) water and sewerage rates; (03) land tax; (04) wages and payroll taxes payable 'in respect of employees of the Lessor employed solely for the purpose of promoting, cleaning, maintaining, promoting and/or administering the Centre; (05) insurance premiums; (06) fees payable to 'specialist contractors and consultants in relation to the provision of services, maintenance servicing and repair of the appurtenances of the Centre'; (07) 'the cost of operating and supplying all services provided by the Lessor for the tenants, occupiers and invitees of the Centre' including child minding and policing and regulating traffic in the carpark; (08) the cost (other than costs of a capital nature) of repairs, maintenance, renovations and replacement in the Centre 'or of any services or finishes or fixtures'; (09) the cost of cleaning the common areas; (10) the cost of supplying energy and communications for the Centre generally; (11) the cost of toilet requisites in the common areas; (12) the cost of waste removal; (13) the cost of maintaining gardens and landscaped areas; (14) 'the provision of security and/or caretaking services in the Centre'; (15) 'the cost of managing, controlling and administering the Centre', including reasonable wages paid to employees of the Lessor and fees to managing agents; (16) the cost of air conditioning the common areas; and (17) audit costs.
30 Clause 3.04 made detailed provision for the Lessee to pay 'outgoings rent', being a contribution, calculated according to a specified formula, to 'the outgoings for the lease year from time to time in question'.
The Tribunal's first decision
31 In the Tribunal's first decision, Skiwing succeeded in its submission that the Disclosure Statement did not include the information required by s 11. But it failed in its argument that it should therefore not be required to contribute to outgoings, as defined in the Lease. This was on the ground that it did not exercise within six months any right of termination of the Lease that arose under s 11(2).
32 The Tribunal also rejected Skiwing's argument that s 12 relieved it of any liability for outgoings. It held that the term 'services' in that section did not extend to 'outgoings' of the nature that Stockland claimed. It expressed the opinion that the consequences of a lessor's failure to include sufficient information about a lessee's liability to pay or contribute to 'outgoings', as distinct from 'services', were fully dealt with in s 11.
33 In support of its argument regarding s 12, Skiwing relied on a ruling of the Tribunal in Randi Wixs Pty Limited v Pokana Pty Limited (No 2) [2003] NSWADT 4. Here the Tribunal was considering costs under the heading 'Fire Protection', which is one of the items in the list in Schedule 2 that s 11(1) requires to be disclosed as 'outgoings' in a Disclosure Statement. It held that these were also costs of 'services' within s 12. It said, at [49]:-
49 … It seems to me that, absent appropriate disclosure in accordance with the clear requirements of the Act, the nature and content of the fire safety audit falls within the provision of `equipment or services' within section 12 such that, absent disclosure, the cost thereof is to be borne solely by the Respondent as Lessor.
34 In what we have called 'the Tribunal's first decision' in the present proceedings, at [72 - 73], the Tribunal rejected this line of reasoning:-
72 In my opinion s.12 does not deal with 'outgoings' which are dealt with in numerous other sections of the Act. On ordinary principles of statutory interpretation, the list of cost items referred to in s.12 uses specific language and does not include a reference to 'outgoings'. Given that 'outgoings' are expressly defined in s.3 and dealt with elsewhere, ss. 22, 27-30, it is in my opinion not possible to contend that 'services' in s.12 includes the various activities that relate to the operation of the Centre the cost of which is covered by the lessor's outgoings.
73 I read the scheme of the Act with regard to outgoings to be that they are required to be in the Disclosure Statement by virtue of s.11 and that they cannot be recovered except pursuant to express provisions of the lease, s.22….
35 It made the following comment on the ruling in Randi Wixs:-
75 I do not think I am bound by those observations, which did not examine the language of the Act as I have done above, to conclude that no outgoings at all can be recovered here.
The first appeal
36 In our decision in the first appeal (Skiwing Pty Ltd v Trust Company of Australia Limited (RLD) [2005] NSWADTAP 10), we endorsed the Tribunal's ruling on s 11, but overturned its ruling on s 12.
37 In its submissions regarding s 12, Skiwing argued that some of the matters covered in the Lease's definition of 'outgoings' in clause 1.16 clearly fell within the notion of 'services'.
38 Stockland submitted that only one phrase in this clause - 'The cost of operating and supplying all services from time to time provided by the Lessor…' in 1.16.07 - referred to 'services', but that these would not be 'services' within s 12 because they were not eiusdem generis with (that is, in the same general category as) 'finishes, fixtures, fittings [or] equipment'. Stockland otherwise relied on the Tribunal's reasoning.
39 We held, at [59], that the Tribunal's reasoning did not sufficiently take account of the definition of 'outgoings' in s 3 of the RL Act. At [60], we pointed out that this definition embraces payments of 'expenses' or of 'rates, taxes, levies, premiums or charges' that are made by a lessor and are for that reason 'a lessor's outgoings'. The term 'outgoings', we said, does not merely 'include such payments' but constitutes what the term 'means'.
40 Our judgment continued as follows:-
61 What the Tribunal describes as 'the scheme of the Act with regard to outgoings' can therefore only apply to 'outgoings' in this sense of payments that the lessor has made. It cannot apply to charges that the lessor levies upon a lessee for services that the lessor itself provides.
62 On this view, even if the Act does establish separate regimes for 'outgoings' and 'services', anything in the nature of a 'service' that the lessor itself provides pursuant to the lease cannot fall within the former regime. But it may well be a 'service' within s 12, in which event this section prohibits the charging of any contribution to the lessee unless the liability to make this contribution has been disclosed in the Disclosure Statement.
63 It also follows that an item included in a definition of 'outgoings' in a lease will not be an 'outgoing' under the Act if it is in the nature of a service that the lessor itself provides. Furthermore, it may well be a 'service' within the meaning of s 12.
64 In our view, this is the case with item 1.16.07 in the Lease, which begins with the words 'The cost of operating and supplying all services from time to time provided by the Lessor…'. It would appear also to be the case with item 1.16.15, which begins with the words 'The cost of managing, controlling and administering the Centre..' We say this because at [20] the Tribunal described the 'very substantial management fee' included in Stockland's figures for 'outgoings' as 'a fee charged by Stockland'.
65 In Stockland's Disclosure Statement, under a heading 'Facilities and services provided by the lessor', the entry 'nil' appears. According to our reasoning, Stockland is therefore debarred by s 12 from relying on clause 3.4 (the clause rendering Skiwing liable to make contributions to 'outgoings' as defined in the Lease) in order to claim any amount pursuant to clause 1.16.07, or (it would seem) clause 1.16.15. This ruling may apply also to other items in clause 1.16. The underlying reason is that Skiwing's liability to make any such contribution was not disclosed pursuant to s 12.
41 By virtue of this reasoning, we held that the Tribunal's orders in the first decision must be set aside. We remitted the proceedings to the Tribunal for reconsideration of two issues: (a) the extent of any liability of Skiwing to contribute, as claimed by Stockland, to outgoings under the Lease and (b) the amount of any payment to be made by either party to the other party.
The Tribunal's second decision
42 In a decision delivered on 10 August 2005 (Skiwing Pty Ltd v Trust Company of Australia Limited [2005] NSWADT 188 - 'the Tribunal's second decision'), the Tribunal, again constituted by Mr Donald, made orders by way of implementation of our decision. It is against those orders that Stockland has again appealed to this Panel.
43 At [8], the Tribunal defined its task as being -
to examine the outgoings here claimed by the Lessor and determine which of them also constitute 'services' provided by the Lessor, applying the Panel's reasoning, so as to be barred under s.12 for failure of the Lessor to have declared them in the Disclosure Statement either as outgoings or as services.
44 At [9 - 10] it referred to our statement that expenses within items 1.16.07 and 1.16.15 of the Lease would or might not be recoverable by Stockland on account of s 12. It is useful here to quote these two items in full:-
1.16.07 The cost of operating and supplying all services from time to time provided by the Lessor for the tenants, occupiers and invitees of the Centre including but without limiting the generality of the foregoing the cost of providing or subsidising any child minding centre and the cost of policing and regulating traffic in the carpark.
1.16.15 The cost of managing, controlling and administering the Centre and the collection of rents and other monies including but without limiting the generality of the foregoing the reasonable wages and other emoluments paid to any Centre manager and other clerical staff employed by the Lessor for such purposes together with all statutory overheads related to such wages and fees and charges paid to any managing agent but not including leasing commissions and fees and salaries, wages, travelling and accommodation expenses incurred by the directors or administrative officers of the Lessor not directly engaged in the management and operation of the Centre.
45 At [12 - 13], it said:-
12 It might be contended that the Appeal Panel was drawing a distinction between, on the one hand the Lessor itself by its own staff and using its own assets providing a service in relation to the building and of benefit to each shop premises and, on the other hand outsourcing that work to other people by way of contract. The Panel did not specifically deal with that distinction but reading their decision, it would be in my view an inappropriate one because the key issue they appear to address, particularly in singling out items 1.16.07 and 1.16.15 is the nature of the service and whether that service is one for which the Lessor accepts responsibility.
13 Therefore I am proceeding on the basis that debarred items are those constituting services whether provided by the Lessor itself using its own staff and assets or outsourced to contractors whether as to personnel or equipment.
46 At [16], it summarised arguments put by Stockland relating to other items in clause 1.16:-
16 For example the Lessor submits that, 'The repair and maintenance of the common areas of the Centre is part of the cost of operation of the building rather than a service provided by the lessor.' So, too, for the cleaning of common areas, the cost of maintaining gardens and landscaped areas, the cost of providing security and also management expenses. The Lessor specifically asserts that "Wages of staff of the Centre employed in relation to its operation are part of the cost of operation of the building rather than a service provided by the lessor."
47 Its conclusion, set out at [18 - 19], was however that these arguments could not be accepted:-
17 I find it impossible to draw those distinctions for those items all of which seem to me quite clearly to fall within the Panel's description of services.
18 Of the listed items, I think it is quite clear that rates, tax, insurances, toilet requisites, waste removal are not services provided by the Lessor. However, on the face of it all the others are as they are all services that partly pertain to each retail shop lease in the Shopping Centre and they are provided by the Lessor whether directly through its own staff or through contractors.
48 At [19], the Tribunal accordingly ordered that Stockland should:-
1. prepare a Schedule of outgoings for each of the six financial years limited to the following items: municipal rates, water rates, land tax, insurances, toilet requisites and waste removal, excluding other items,
2. calculate the appropriate share of the Lessee applying the provisions of the Lease in respect of the lettable retail area of the Centre which the Appeal Panel agreed I had found were correctly applied.
3. either reimburse the Lessee with any difference between the total amount already paid for those years 2000 to 2005 and the proper claimable amount or alternatively if there is a continued shortfall, issue a notice to the Lessee which the Lessee is by virtue of this judgment obliged to pay.
4. issue future notices of the Lessee's share of contributions to outgoings on that basis.
The present (second) appeal
49 The appeal with which we deal in this judgment ('the second appeal') is an appeal by Stockland against these orders set out in the Tribunal's second decision.
50 Stockland also applied for a stay of these orders by the Tribunal, pending disposition of its appeal. This stay was granted in an ex tempore decision given on 28 September 2005 (Trust Company of Australia Limited v Skiwing Pty Ltd (RLD) [2005] NSWADTAP 52).
51 At the commencement of the hearing of the second appeal on 18 November, we rejected a request by Skiwing that we should refer the questions of law arising in the appeal to the Supreme Court, pursuant to s 118 of the Administrative Decisions Tribunal Act 1997. We took into account the following considerations: (a) written submissions had already been prepared; (b) our decision and reasons, based on these submissions and on oral argument at the hearing, might well assist the Court of Appeal if, as was foreshadowed, an appeal to that Court was lodged against the decision; and (c) completion of the hearing would not incur significant further cost.
52 For the sake of completeness, we mention here that Skiwing also appealed against the Tribunal's second decision, principally on the ground that it made no provision for the payment of interest. At the hearing of the second appeal, we held, however, that this issue could not be resolved until after Stockland's appeal had been determined. We accordingly deferred consideration of it.
53 The hearing of the second appeal was principally taken up with argument on various possible approaches to defining the terms 'services' and 'outgoings' within the RL Act.
54 Mr P Biscoe QC, who appeared for Stockland with Ms M Allars, suggested three such approaches, each of which departed from the opinions set out in the first appeal and the Tribunal's decision and resulted in a more favourable outcome for Stockland. He submitted that we should examine the relationship between 'services' and 'outgoings' in closer detail than we did in the first appeal. He added that in the second appeal we were being presented with more refined arguments on this question of interpretation.
55 Mr Z Stojanoski, appearing as agent for Skiwing, argued that the Tribunal's second decision should be upheld.
Alternative approaches to defining 'services' and 'outgoings'
56 A convenient way to set out the competing submissions and our conclusions in this appeal is to discuss one by one each of five possible approaches to defining 'services' and 'outgoings'.
57 In referring here to the task of 'defining' the term 'outgoings', we do not mean that any definition other than that contained in s 3 is applicable. What is relevant for our purposes is the relationship of the statutory concept of 'outgoings' to the meaning of the term 'services', as used in s 12.
58 1. Costs of 'services' not intended to include any expenses of the type designated as 'outgoings'. As indicated above at [32], this approach was adopted in the Tribunal's decision. It also formed a major part of the written submissions on Stockland's behalf. This approach, as we understand it, derives support from two features of the RL Act.
59 The first, on which the Tribunal's first decision placed explicit reliance, is that the Act, in setting out requirements for disclosure by lessors and remedies in the event of insufficient disclosure, has created two distinct regimes relating respectively to 'outgoings' and to the costs of 'services'.
60 Under the former regime, lessors are required by s 11(1) and Part 1 of Schedule 2 to include in their disclosure statements detailed information about a prospective lessee's liability for outgoings. Lessors can only recover contributions to outgoings if provisions satisfying certain conditions are included in the lease itself (s 22). During the term of the lease, they are contractually bound, pursuant to ss 27 and 28, to supply further information to the lessee regarding both estimated future outgoings and the basis on which contributions to past outgoings are claimed.
61 In the event of a lessor's failure to comply with s 11(1), or when the disclosure statement is misleading or incomplete, the lessee has the right, subject to significant limitations of scope and duration, to terminate the lease (s 11(2)). In the latter situation, the lessee may have grounds to claim compensation for misrepresentation (s 10). A lessor's failure to comply with s 11(1) may also constitute an offence (s 11(6)).
62 By contrast (this approach suggests), the sole provisions regarding disclosure with regard to the costs of 'services' are s 12 and the relevant phrases in Part 1 of Schedule 2. All that need be done to comply with these requirements is to disclose 'the liability to make the payment or contribution' in the lessor's disclosure statement. No further details are required.
63 The principal remedy granted to the lessee in the event of non-disclosure is, however, the potent one of claiming that any clause in the lease purporting to render the lessee liable is void. The exercise of this right of a lessee under s 12 is not subject to any time-limit and the lessor has no grounds of defence such as are to be found in s 11(3).
64 We would point out, however, that this is not the sole remedy. The alternative remedy of termination of the lease under s 11(2) (to be exercised within six months, and subject to some qualifications) is also available to the lessee. This is because a failure to disclose the information required by s 12 (which includes any liability of the lessee to contribute to fittings etc as well as to the cost of 'services') will render the lessor's disclosure statement 'materially false or misleading' and/or 'incomplete', within the meaning of s 11(2). In addition, the remedy of compensation under s 10 on account of a 'pre-lease misrepresentation' may also be available.
65 In the Tribunal's first decision at [73], this establishment of two separate regimes for 'outgoings' and the costs of 'services' respectively was described as 'the scheme of the Act'. But in view of the concurrence of remedies to which we have just drawn attention, the two regimes are not segregated from each other as completely as might appear at first sight. Failures of disclosure regarding not only 'outgoings' but also 'services' fall within the scope of both s 11 and Schedule 2.
66 The second feature of the Act from which this approach to defining 'services' derives support was given significant emphasis in the submissions on behalf of Stockland. It is that the Act's definition of 'outgoings', set out in s 3 and supplemented by the list of categories of possible outgoings in Part 1 of Schedule 2, focuses on the building in which the relevant retail shop is contained, together with associated buildings, land or 'areas', whereas the word 'services' in s 12 and in Part 1 of Schedule 2 appears alongside terms or phrases that relate to the leased shop itself.
67 This contrast may readily be illustrated. Paragraph (a) of the definition of outgoings begins with the words 'the expenses directly attributable to the operation, maintenance or repair of the building in which the retail shop is located…' and paragraph (b) refers to the rates, taxes etc that the lessor must pay by virtue of being the owner or occupier of 'any such building or land'. Similarly, the items listed under the heading 'Outgoings to be paid by the lessee' - they include, for example, the lessor's expenditure on air conditioning, car parking, energy management, gardening, land tax, lifts and escalators, pest control, security and sewage disposal - relate naturally to buildings or to land, rather than to individual shops. On the other hand, 'services' in s 12 follows the words 'finishes, fixtures, fittings, equipment and', and in Part 1 of Schedule 2 the items referring to 'finishes, fixtures, fittings, equipment and services' are followed by other items specifically relating to the 'shop' that forms the subject of the lease.
68 Mr Biscoe submitted that, by virtue of these aspects of the legislation, the term 'services' in s 12 should be interpreted eiusdem generis with (that is, in the same general category as) the preceding terms 'finishes, fixtures, fittings [or] equipment' and as referring, like these terms in their context, to individual shops rather than to buildings or land. By virtue of this reasoning, he submitted, we should treat 'services' as a concept wholly distinct from 'outgoings'. He acknowledged, however, that we had held otherwise in the first appeal.
69 He argued also that this interpretation was supported in a passage in a judgment to which Mr Stojanoski had previously drawn our attention. In Farooqi & Farooqi v Mazzocchetti & Mazzocchetti [1998] SASC 6619, Bleby J, in the Supreme Court of South Australia, dealt with a covenant in a lease binding the lessee to 'repair all… air conditioning'. His Honour held that it could not be enforced against the lessee because the cost of so doing fell within the phrase 'cost of… services' in the South Australian equivalent of s 12 of the RL Act, and the lessor's disclosure statement had not referred to any such liability on the lessee's part. After quoting the terms of the South Australian section, Bleby J said that 'reference to the cost of "services" would include services provided by way of repair and maintenance of equipment'.
70 In Butterworths Australian Legal Dictionary (Butterworths, 1997), the definition of 'outgoings' at p 830 commences with the phrase 'Regular financial responsibilities incidental to the use of real property…' They are said not to include 'a charge or levy upon an owner rather than upon the property'.
71 When asked by a member of the Appeal Panel about dictionary definitions of 'services', Mr Biscoe replied that, after investigating them, he had concluded that they were too numerous, and differed too much from each other, to provide useful assistance.
72 The principal difficulty that we discern in this reasoning is that while it appears appropriate in cases where the retail lease is of a shop within a retail shopping centre or a large building containing several such shops, the distinction being drawn is likely to be difficult to apply where the leased premises constitute the whole of a building. Many, probably most, retail shop leases would be of premises of this nature. In this situation, the asserted distinction between 'the expenses directly attributable to the operation, maintenance or repair of the building' (s 3) and the cost of 'services' relating to the leased shop premises may be far from clear. A number of items claimed by Mr Biscoe to relate to 'the building' - for example, air conditioning, pest control and security - could equally be said to relate to a particular shop, not the building in which it is located.
73 We note also that while in the form of lessor's disclosure statement in Part 1 of Schedule 2 the items referring to 'finishes, fixtures, fittings, equipment and services' are followed by other items specifically relating to the 'shop', the later reference to 'services' is to be found in a very different context. Under the heading 'Retail shopping centre details', information is required as to 'Facilities and services provided by the lessor'. This phrase is not, as we read it, concerned with individual shops only, if at all.
74 We do not think that the decision in the Farooqi case provides much support for Mr Biscoe's argument, as it did not any way rely on an interpretation of s 12 confining the term 'services' to services relating specifically to the relevant shop. It is clearly compatible with such an interpretation, but that is all.
75 We note furthermore that this approach urged by Mr Biscoe does not sit easily beside the distinction drawn in s 30 of the RL Act between 'non-specific' outgoings of a lessor and outgoings that are 'referable to' one or more particular shops (see [23] above).
76 2. Costs of 'services' as a sub-category of 'outgoings'. An alternative approach suggested by Mr Biscoe was that while 'services' in s 12 should be interpreted in the restricted way that we have just outlined, 'outgoings' should be regarded as a wider concept, including the costs of 'services'
77 As we understand this argument, it was advanced in order to avoid the difficulties associated with attempting to draw a hard and fast line between 'outgoings' and the costs of 'services'. It would still, however, be sufficient in this appeal to serve Stockland's purposes. This is because in its submission none of the contributions to outgoings that it has claimed from Skiwing pursuant to clauses 1.16 and 3.4 of the Lease relate solely to the shop premises leased to Skiwing. Under this alternative argument, Stockland can still maintain that it is not claiming, contrary to s 12, a contribution by Skiwing to the cost of any 'services'.
78 We agree that this approach to interpretation has the advantage of not endeavouring strictly to erect a line of demarcation between 'outgoings' and 'services'. But ultimately its acceptance, and indeed the outcome of this appeal, must depend on whether it is legitimate, in the light of the provisions of the RL Act and the policy underlying those provisions, to interpret 'services' eiusdem generis with the terms preceding it, or otherwise as confined only to matters specifically relating to the shop being leased.
79 3. 'Services' confined to 'utility services'. Mr Biscoe advanced, but did not strongly press, an argument that 'services' in s 12 should be confined to 'utility services', such as the supply of gas, water or electricity. We agree with him that this meaning often arises in real estate contexts.
80 We are not attracted to this proposition, however, for two reasons. First, the references to 'services' in the form set out in Part 1 of Schedule 2 envisage that they may be 'provided by' the lessor or, indeed, the lessee. It is artificial to regard a lessor as providing the 'service' of gas or electricity to a lessee, and even more artificial to regard a lessee as the provider of such services to itself. Secondly, a lessor's payments for 'utility services' clearly form part of the statutory concept of 'outgoings'. There is no obvious reason why these limited categories of outgoing should be singled out by the Act for special treatment, under the broad label 'services'.
81 4. 'Services' distinguished from benefits leading to 'outgoings' on account of being provided by the lessor itself. According to this approach, a 'service' is some benefit that a lessor itself provides to a lessee, whereas an 'outgoing' is a payment which the lessor has made to a third party and in respect of which it claims reimbursement or contribution from a lessee. By virtue of this dividing-line between them, they are mutually exclusive categories.
82 The statutory definition of 'outgoing' clearly treats it as an item of expenditure. The same applies to dictionary definitions. For example, the Macquarie Dictionary (3rd edn, p 1529) provides the following definition for the noun 'outgoing':-
( usually plural ) an amount of money expended; outlay; expenses
83 Our judgment in the first appeal, at [61 - 64], contemplated an approach along these lines. These paragraphs are quoted above at [40].
84 In its second decision, however, the Tribunal at [12 - 13] (see [45] above) queried whether this suggested distinction between the costs of services and outgoings could in practice be maintained.
85 At the hearing of the second appeal, Mr Biscoe pointed out that this approach would have a number of distinctly artificial consequences. For example, the provision of a child-minding centre would be a 'service' if it was staffed by employees of the lessor, but would lead to 'outgoings' if it was staffed by employees of a company related to the lessor, such as a wholly owned subsidiary. If a lessor switched from the former mode of provision to the latter during the currency of a lease, the expenses that it incurred in making child-minding available would likewise move from the category of costs of a 'service' to that of 'outgoings'.
86 We consider that these concerns are well-founded, and in so far as our judgment in the first appeal treated as determinative this mode of differentiating services from outgoings, we would not wish now to follow it.
87 5. Costs of 'services' and 'outgoings' as overlapping categories. According to this approach, being the last one that we will discuss, 'services' should be given their natural meaning (taking into account the fact that the form in Part 1 of Schedule 2 of the RL Act contemplates their being provided by either a lessor or a lessee) and the costs of a 'service' may or may not also be an 'outgoing' depending on whether they fall within the statutory definition of 'outgoings' in s 3.
88 This approach has the potential to produce a substantial overlap, in any given case, between the costs of the 'services' provided by a lessor and the 'outgoings' that the lessor sustains. The Act indicates that a lessor's expenses on the items listed under the heading 'details of outgoings' in the form in Part 1 of Schedule 2 may indeed be 'outgoings' within the statutory definition. But many of these items would also be 'services', according to the natural meaning of the term. This would be the case, for example, with child minding, cleaning, management costs, pest control, security and (as held in Randi Wixs Pty Limited v Pokana Pty Limited (No 2) [2003] NSWADT 4 - see [33] above) fire protection.
89 In the Tribunal's reasons for its second decision, this approach appears to have been adopted. It implicitly acknowledged an overlap between the two concepts by treating as costs of 'services' the expenditure by Stockland on a number of items that are to be found on the list in Schedule 2 (for example, gardening, management expenses and security). We would refer also to the Tribunal's comment, at [12], that the 'key issue' which we ourselves appeared to address in our decision on the first appeal, was 'the nature of the service and whether that service is one for which the Lessor accepts responsibility'. The Tribunal's next observation suggested that it interpreted 'services' according to its natural meaning, which on any view is a broad one:-
13 Therefore I am proceeding on the basis that debarred items are those constituting services whether provided by the Lessor itself using its own staff and assets or outsourced to contractors whether as to personnel or equipment.
90 In our opinion, having reconsidered in this second appeal what we said in the first appeal about the definitions of 'services' and 'outgoings', the correct approach is indeed the one we are now discussing. As indicated above at [86], this entails abandoning the distinction between the two concepts that we formerly drew, based on whether or not the lessor's own employees were involved in the relevant activity.
91 According to the view that we are now taking, a number of the items of expenditure described as 'outgoings' in clause 1.16 of the Lease are also costs of 'services' within s 12 of the RL Act, whether or not they constitute 'outgoings' within the statutory definition in s 3. These include two items about which we specifically commented in our decision in the first appeal: namely, 'the cost of operating and supplying all services provided by the Lessor for the tenants, occupiers and invitees of the Centre' including child minding and policing and regulating traffic in the carpark (clause 1.16.07) and 'the cost of managing, controlling and administering the Centre', including reasonable wages paid to employees of the Lessor and fees to managing agents (clause 1.16.15). As to the first of these, we would add that any interpretation of s 12 that led to this item being excluded from the section would, in the light of its opening words, be difficult to justify.
92 It may be objected that this approach to defining 'services' provides undue scope for lessees to rely on an omission in the lessor's disclosure statement in order to avoid being compelled to make a proper contribution to the costs of facilities from which they derive significant benefit. But in response to this objection, we would make two observations.
93 The first is that the RL Act's broad purpose of protecting the interests of retail lessees, while not in any sense its only purpose, must always be borne in mind when resolving difficult issues of interpretation. The specific function of a lessor's disclosure statement clearly is one of protecting these interests. Not only a copy of the proposed lease (s 9) but also a lessor's disclosure statement (s 11(1)) must be given to the prospective lessee before the lease is entered into. This statement furnishes the lessee with an opportunity to ascertain, without having to read the lengthy and detailed terms of the agreement of lease itself, what financial obligations will be imposed by the lease. In the lessee's disclosure statement (s 11A), the lessee must then indicate an ability to 'fulfil the obligations contained in the lease, including the payment of the proposed rent, outgoings and other amounts' (see [25] above). In so indicating, the lessee relies principally of not wholly on what the lessor's disclosure statement has revealed about these financial obligations.
94 An interpretation of the Act which promotes this general aim has in our opinion a strong claim, on general policy grounds, to be accepted in preference to an interpretation which restricts the lessor's obligations of disclosure.
95 Secondly, lessors frequently use the checklist of categories of 'outgoing' set out in the form in Schedule 2, or follow precedents in established texts for clauses dealing with outgoings, in each case with a view to ensuring that all information required for the disclosure statement is in fact included. Lessors who adopt either of these expedients will at the same time ensure compliance with the obligation in s 12 to disclose any liability of the lessee to contribute to the cost of 'services'. This is a natural result of a ruling that treats 'outgoings' and the costs of 'services' as overlapping categories. Usually, only complete or substantial failure to comply with the obligation in s 11(1) to provide a proper disclosure statement, as occurred in this case, will confer on the lessee the right to claim that it is exempt from any liability to contribute to the cost of 'services'.
96 Seen in this light, the chief effect of our decision, in so far as it attributes a wider connotation to the term 'services' in s 12 than may have previously been thought to exist, is to extend the scope of remedies available to a lessee in cases where compliance with the lessor's obligation to provide a disclosure statement has been non-existent or seriously deficient. If this extension to the legal weaponry available to lessees appears dramatic, one reason is that the other remedies available, notably under s 11, are subject to major limitations (see [15] above). It cannot be said that the Act exhibits a coherent policy on this score, any more than it does on the question of interpretation of 'outgoings' and 'services' with which this decision, along with three prior decisions within the same proceedings, has been preoccupied.
Our orders
97 As explained above, the interpretation of the key term 'services' that we favour in these reasons accords with that adopted by the Tribunal in the decision under appeal. The Tribunal applied this interpretation in making its orders numbered 1 to 4. Stockland did not argue to us that in framing those orders the Tribunal departed erroneously from the approach to interpretation that it perceived to be correct.
98 Stockland, as appellant, has therefore not demonstrated to us that the Tribunal erred in law in any aspect of its decision of this issue. Under s 113(2) of the Administrative Decisions Tribunal Act 1997, as interpreted in numerous cases, this is a pre-requisite to maintaining a successful appeal.
99 The Tribunal's decision on this issue must accordingly stand.
100 A further subsidiary element of Stockland's appeal related to a declaration made by the Tribunal in its second decision, to the effect that Skiwing was obliged under the Lease to pay a contribution to a promotional fund. Stockland claimed in the appeal that this declaration should be replaced by an order for Skiwing to pay the relevant amount. The Tribunal's accompanying orders, however, contemplate a settling of accounts between the two parties, following ascertainment of the amount due from Skiwing to Stockland for such outgoings as do not fall within s 12. It is preferable in these circumstances that Skiwing's liability to contribute to the promotional fund should continue to be embodied in a declaration, rather than an order for immediate payment. This liability can then constitute a further component of the final settlement of accounts between the parties so far as these proceedings are concerned.
101 For these reasons, the appeal is dismissed.
102 The stay order made on 28 September 2005 is discharged.